Can large and mid-cap funds help you buy your dream car?

Large and mid-cap is the new category as per the SEBI (Securities and Exchange Board of India) re-categorization circular. As per SEBI’s re-categorisation circular, large and mid-cap funds are those who invest at all times minimum 35 per cent of total assets in equity and equity-related instruments of large-cap companies and minimum 35 per cent of total assets in equity and equity-related instruments of mid-cap companies.

Now the question is whether the funds from these categories help in achieving your goal of buying your dream car? To answer this, we first need to take into consideration certain things such as, the price of the car that you wish to buy in today’s terms, inflation, etc. Let us take an illustration to understand it better. Let us assume that the car that you wish to possess in the next 7 years is currently priced at Rs. 30 lakh, which inflates at the rate of 5 per cent. That said, would you be able to achieve this goal? Let’s find out.

First of all, let us find out the value you would need after 7 years to buy your dream car. You would need Rs. 42.21 lakh after 7 years to buy your dream car. If we look at the 1-year, 3-year and 5-year category returns of large and mid-cap funds then it stands at 2.18 per cent, 9.98 per cent and 11.12 per cent, respectively. So, assuming that this category would give your 10 per cent rate of returns, you would require to do SIP (Systematic Investment Plan) of Rs. 34,600 per month for 7 years or if you have lumpsum amount of Rs. 21.66 lakh then you can achieve this goal. So, all in all, to achieve this goal you either need to have an income of Rs. 1.73 lakh per month or you need to delay the goal by few years depending upon your income.